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State is underspending - Nxesi

Article By: Mark Allix

Mon, 26 Nov 2012 3:48 PM

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A file photo shows Thembelani Thulas Nxesi being sworn in. Supplied

While acknowledging a "rising underspend" by the government, Public Works Minister Thulas Nxesi says the pace of transformation in SA’s construction sector is far too slow.

He says this is particularly evident among listed construction and engineering groups and higher-tier subcontractors.

In response, the government has said it intends to criminalise fronting, boost supply chain diversification in state procurement, and monitor black economic empowerment verification agencies more closely - all of which is in line with the state’s amended empowerment codes.

The minister, however, says accelerated change in equity and ownership must be driven by "all sectors" of society, and lead to a "globally competitive industry".

Many blacks are represented in the lower levels of the construction sector, along with steadily increasing ownership. But registered built-environment professionals and technical staff are still mostly white males. South Africa faces critical skills shortages as insufficient black graduates are being produced to replace them.

At a construction industry "transformation summit" in Johannesburg on Friday, agencies in the Department of Public Works acknowledged "rising underspend" by the government. They also indicated that poor-quality construction projects cost the state R3.5bn annually.

But the racial and spatial history of apartheid presents great challenges. In this regard, the government has adopted a more militant tone on black economic empowerment, driven by the Department of Trade and Industry.

Mr Nxesi said he understood amendments to broad-based black economic empowerment codes to be mandatory. "But whether they are being enforced, or are enforceable, is another matter," he said.

Construction Industry Development Board chairman Bafana Ndendwa said empowerment was vital to growing SA’s economy. "Fronting deserves special attention - and not because the fraud laws in SA are inadequate."

He said all construction companies in SA had been invited to take part in infrastructure development. But few large firms had wanted to build low-cost housing, schools and clinics, until the poor economic climate had hit their pockets.

Authorities were considering "clustering" such projects, enabling big contractors to build 20 schools at a time. But Mr Ndendwa said this would disadvantage smaller competitors. To this end, the state was considering "ring-fencing" upper-tier infrastructure contracts to promote higher levels of empowerment.

Mr Nxesi said the amended empowerment codes were "not intended to destroy companies", but the government needed to be able to conduct "proper estimates".

He acknowledged a crisis in SA’s construction sector. This stemmed not only from global instability, but because the government’s "supply chain management processes are horrible". But the private sector was also to blame. "We come from a history of corruption, overpricing and collusion."

Port Elizabeth’s Herald newspaper said this month the metro employed only one registered professional engineer. At one time it had 50. This deepened government reliance on consultants. There was also a heightened risk of declining quality control, fraudulent tendering, and the decay of road, water and sewage systems.